Supreme Court considers interaction between adjudication and the Limitation Act 1980

Supreme Court considers interaction between adjudication and the Limitation Act 1980

The Supreme Court in Aspects Contracts v Higgins [2015] UKSC 38 overturned the Court of Appeal holding that the limitation period for a repayment claim starts from the date of the payment of monies to the other side in compliance with the adjudication decision. However, if an adjudicator dismisses a claim put forward during an adjudication, that claim can still be pursued through litigation/arbitration to a final resolution but must be brought with the limitation periods of the underlying cause of action.

Practical implications

This decision may end up having profound implications for those involved in adjudication proceedings when considering whether or not to bring court proceedings in relation to an underlying dispute which has only partially been accepted in an adjudication decision. When dealing with an adjudication claim the Supreme Court decision has the following implications:

Claim dealt with by the adjudicator's decision

This will be binding on the parties unless litigation/arbitration determines that the decision was incorrect at which point it will be retrospectively corrected by the court/arbitral tribunal. A party wishing to dispute the adjudication decision in relation to payment of monies to another party will be subject to a limitation period which runs from the date payment in compliance with the adjudication decision.

Claim is rejected by the adjudicator

If a party wishes to continue to pursue a claim they will need to do this in compliance with the limitation periods which apply to the underlying causes of action; these will generally be a much earlier date than that of the adjudication decision. This principle applies whether the claim is made as a standalone claim through the courts/arbitral tribunal or as a counterclaim to a case brought by the other party for repayment of monies under an adjudication decision.

The key point to note from this claim is that this does not put one party at a distinct advantage to another in terms of limitation periods, rather it means that practitioners need to be aware of when the limitation period for their claim will expire and to take a commercial decision either to pursue it within that time frame if they consider the claim is strong enough or not to pursue within that time limitation of not. However, if the latter then any future attempt to claim it, even as a counterclaim, will be subject to a limitation defence.

Practical considerations for those involved in construction contracts will be:

  1. enter into a contract under seal as this will extend the limitation period to 12 years and would head off the issue in this case
  2. get final accounts settled so avoiding issues of monies due
  3. if faced with this situation deploy all available defences so putting the claimant to proof not only on the amount it is claiming back but also the remaining amount on the basis that the adjudicator's decision had been wrong on that sum

Further information

A full analysis of this decision is available for PSL DR and PSL Construction subscribers in the following reports (Click here for a free trial):

LexisPSL by Janna Purdie

LexisPSL by Adam Temples of 4 Pump Court

LexisPSL by Isabel Hutchings of Crown Office Chambers

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About the author:

Janna is a dispute resolution lawyer. She deals primarily with cross border issues and is active in the work being undertaken in relation to the implications of Brexit for Dispute Resolutions lawyers. Janna also heads up a LexisNexis costs team bringing together expertise from across the company to deal with the costs issues facing the profession.